Battle Over Coyote Water

Small company has big dreams of putting SCVWD out of
Morgan Hill – The little Great Oaks Water Company has big dreams: it wants to wrestle away control of Coyote Valley from San Jose and drive the Santa Clara Valley Water District out of business.

“In one form or another, I think it will happen,” said John Roeder, the water company’s executive vice president. “It may just be that the water district is split into two agencies.”

Roeder has already sued San Jose over water supply in Coyote Valley, and fantasizes about relegating the water district, which has a budget of about $390 million and is the wholesale water supplier to all of Santa Clara County, to flood control duties. Great Oaks, he said, will step in as water supplier, distributing water more efficiently and much more cheaply.

“There may be a number of benefits,” Roeder said. “Water rates will be a lot cheaper. We’re much more efficient and can provide more service with fewer employees.”

Great Oaks is one of several water retailers in the county, including the cities of Gilroy and Morgan Hill. It serves about 100,000 people in San Jose in a territory that extends as far south as Palm Avenue, just north of Morgan Hill. About half of its $10-million budget goes to the water district.

The water district is the county’s wholesaler and collects what’s known as a pump tax from the owners of wells, whether they’re homeowners or retailers. It collects the tax to maintain the county’s recharge ponds and to cover the costs of pumping water in from the Central Valley.

Roeder has visions of becoming the county wholesaler and talks about using a variety of complicated state laws to begin siphoning water from the district to supply it to other customers at lower rates. The district charges South County customers $215 an acre-foot, or about the amount of water two families use in a year. North County customers pay $420 an acre-foot.

Those who buy their water from a retailer pay substantially more. Depending on how much they use, Gilroy residents can pay $1,000 an acre-foot. Great Oaks charges about $700 an acre-foot.

The company is a vocal critic of the district. Rosemary Kamei, who represents South County on the district’s board of directors, said that Great Oaks is a strong retailer but not prepared to assume the district’s duties.

“We treat them like any other customer and I’d like to think we treat them well,” Kamei said. “Regardless of what they think, we treat them very professionally. Our objectives will remain the same: to serve the people of Santa Clara County with groundwater supply and flood control and protect the environment.”

To take on the district, Great Oaks will have to grow. Under state law, the company can expand at will, providing it can supply water to the area it wants to serve and reaches agreements with other potential retailers. In theory, Great Oaks could become the water supplier to Morgan Hill and Gilroy, if those cities wanted to sell off their systems.

But its first target is Coyote Valley and the greenbelt area north of Morgan Hill.

“We’re absolutely interested in moving south,” Roeder said. “If they develop the greenbelt we’re happy to give them water. If they don’t develop it, we’re happy to give them water. If they’re just farming we’re happy to give them water. We’re easy to please.”

San Jose has plans to fill Coyote Valley with thousands of new jobs and homes and as many as 80,000 new residents. The water district says providing water to that many people will require massive amounts of new infrastructure and perhaps a water treatment plant, paid for in part with a new tax in the development area.

And San Jose also intends to be Coyote Valley’s water retailer. While the city and the district work together to assess how much water a developed Coyote Valley will need, Great Oaks has sued San Jose, alleging that the city is violating a state law that prohibits duplicate water utility service.

Coyote Valley is part of Great Oaks’ territory and the company maintains a limited pipeline network there. Roeder said the city and district are exaggerating the need for water in Coyote Valley and needlessly planning a multi-million infrastructure project.

“They’re wrong,” Roeder says of projections that there’s not enough water in the area. “As parcels develop, we can run extensions to those parcels. We can drill wells as needed and install additional storage tanks as needed.”

Laurel Prevetti, the San Jose planner in charge of Coyote Valley, said she couldn’t comment on pending litigation. She did say that the city intends to “exercise our rights as water retailer.”

And Kamei said Great Oaks has a simplified view of Coyote Valley growth.

“The area is prone to flooding and we want to make sure this is done in a way that won’t induce flooding,” she said.

Roeder says such comments illustrate the thinking that caused the district to grow into a 900-employee agency that he believes overvalues its services and charges too much for water.

“When you turn on the tap, you care about dependability of supply and the quality of water,” he said. “We can provide that.”

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